Publication 517 - Social Security And Other Information For Members Of The Clergy And Religious Workers - 2011 Page 10
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30earnings for ministerial services. $3,500 of the
More information. For more information
(discussed earlier under
Self-Employment
$4,000 is for employee expenses related to his
about the self-employed health insurance de-
Tax: Figuring Net
Earnings) of $400 or
duction, see chapter 6 in Publication 535.
more in the tax year,
ministerial salary, and $500 is related to the
weddings and baptisms he performed as a
•
You are exempt from SE tax on earnings
self-employed person.
from ministerial services and you have
Deduction for SE Tax
The nondeductible (tax-free) portion of ex-
$400 or more of other net earnings subject
penses related to Rev. Ashford’s ministerial sal-
to SE tax, or
For 2011, you can deduct 57.51% of your SE tax
ary is figured as follows:
in figuring adjusted gross income if your SE tax
•
You had wages of $108.28 or more from
is $14,204.40 or less. If your SE tax for 2011 is
($10,000 ÷ $40,000) x $3,500 = $875
an electing church or church-controlled or-
more than $14,204.40, you can deduct the sum
ganization (see
Coverage of Religious
of $1,067 plus 50% of your SE tax. This is an
Workers (Church
Employees), earlier,
The nondeductible (tax-free) portion of ex-
income tax deduction only, on Form 1040, line
under Social Security Coverage).
penses related to Rev. Ashford’s wedding and
27.
baptism income is figured as follows:
This is not a deduction in figuring net
Self-employment tax. If you are liable for SE
!
($10,000 ÷ $40,000) x $500 = $125
earnings from self-employment subject
tax, you must file Schedule SE (Form 1040) with
to SE tax.
your return.
CAUTION
If you filed Form 4361 and did not receive
Required statement. If you receive a tax-free
approval from the IRS, you must pay SE tax on
Income Tax Withholding
rental or parsonage allowance and have minis-
your
ministerial
earnings, as explained earlier.
and Estimated Tax
terial expenses, attach a statement to your tax
Ministerial earnings and expenses from nonem-
return. The statement must contain all of the
ployee ministerial services should be reported
following information.
The federal income tax is a pay-as-you-go tax.
on Schedule C or C-EZ (Form 1040). The net
You must pay the tax as you earn or receive
•
amount should then be carried over to line 2 of
A list of each item of taxable ministerial
income during the year. An employee usually
Schedule SE (Form 1040), Section A or B. How-
income by source (such as wages, salary,
has income tax withheld from his or her wages
ever, if you were a duly ordained minister who
weddings, baptisms, etc.) plus the
or salary. However, your salary is not subject to
was an employee of a church and you must pay
amount.
federal income tax withholding if both of the
SE tax on the wages you earned for those serv-
•
following conditions apply.
A list of each item of tax-free ministerial
ices, do not report those wages on Schedule C
income by source (parsonage allowance)
•
or C-EZ (Form 1040). Instead, report those
You are a duly ordained, commissioned,
plus the amount.
wages less any allowable expenses (including
or licensed minister, a member of a relig-
•
any unreimbursed employee business ex-
ious order (who has not taken a vow of
A list of each item of otherwise deductible
penses), on line 2 of Schedule SE (Form 1040),
poverty), or a Christian Science practi-
ministerial expenses plus the amount.
Section A or B, and attach an explanation.
tioner or reader.
•
How you figured the nondeductible part of
•
Your salary is for ministerial services (see
your otherwise deductible expenses.
Note. For income tax purposes, the un-
Ministerial
Services, earlier).
reimbursed employee business expenses that
•
A statement that the other deductions
you incurred as an employee of the church and
claimed on your tax return are not alloca-
If your salary is not subject to withholding, or if
subtracted from your wages on line 2 of Sched-
ble to your tax-free income.
you do not pay enough tax through withholding,
ule SE (Form 1040) are allowed only as an
you may need to make estimated tax payments
itemized deduction on Schedule A (Form 1040)
See the
attachments
prepared for the
Com-
to avoid penalties for not paying enough tax as
if they exceed 2% of adjusted gross income. You
prehensive
Example, later. Following the exam-
you earn your income.
cannot deduct these expenses on Schedule C
ple, you will find blank worksheets for your own
You generally must make estimated tax pay-
or C-EZ (Form 1040) as a trade or business
use.
ments if you expect to owe taxes, including SE
expense.
tax, of $1,000 or more, when you file your return.
Determine your estimated tax by using the
Exemption from SE tax. If you filed Form
Health Insurance Costs of
worksheet in Form 1040-ES. Pay the entire esti-
4361 and received IRS approval not to be taxed
Self-Employed Ministers
mated tax for 2012 or the first installment by
on those earnings, and you do not have any
April 17, 2012. See Form 1040-ES for the differ-
other income subject to SE tax, do not file
If you are self-employed, you may be able to
ent payment methods. The April 17 date applies
Schedule SE (Form 1040). Instead, enter “Ex-
deduct the amount you paid in 2011 for medical
whether or not your tax home and your abode
empt — Form 4361” on the dotted line next to
and dental insurance and qualified long-term
are outside the United States and Puerto Rico.
Form 1040, line 56. However, if you had net
care insurance for you, your spouse, and your
For more information, see chapter 2 of Publica-
earnings from another trade or business of $400
dependents.
tion 505, Tax Withholding and Estimated Tax.
or more subject to SE tax, see line A at the top of
If you perform your services as a com-
If you qualify, you can take this deduction as
Schedule SE (Form 1040), Section B.
mon-law employee of the church and your sal-
an adjustment to income on Form 1040, line 29.
If you filed Form 4029 and received IRS
ary is not subject to income tax withholding, you
See the Instructions for Form 1040 to figure your
approval not to be taxed on those earnings, and
can enter into a voluntary withholding agree-
deduction.
you do not have any other income subject to SE
ment with the church to cover any income and
The following special rules apply to the
tax, do not file Schedule SE (Form 1040). In-
SE tax that may be due.
stead, enter “Exempt — Form 4029” on the
self-employed health insurance deduction.
dotted line next to Form 1040, line 56.
•
The expenses taken into account for pur-
poses of this deduction are not allowed
More information. For more information on
Filing Your Return
as a medical expense deduction on
filing your return, including when and where to
Schedule A (Form 1040).
file it, see the Instructions for Form 1040.
You must file an income tax return for 2011 if
•
The deduction is not allowed for any
your gross income was at least the amount
month you are eligible to participate in a
shown in the third column of
Table
4.
subsidized plan of your (or your spouse’s)
Retirement Savings
employer.
Additional requirements. Even if your in-
Arrangements
•
come was less than the amount shown in
Table
The deduction cannot exceed your net
4, you must file an income tax return on Form
earnings from the business under which
1040, and attach a completed Schedule SE
the insurance plan is established. Your net
Retirement savings arrangements are plans that
(Form 1040), if:
earnings under this rule do not include the
offer you a tax-favored way to save for your
•
income you earned as a
common-law em-
You are not exempt from SE tax, and you
retirement. You generally can deduct your con-
ployee
(discussed earlier) of a church.
have net earnings from self-employment
tributions to the plan. Your contributions and the
Page 10
Publication 517 (2011)
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